On September 22 local time, just a week after China submitted an application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Taiwan submitted (link in Chinese) an application as well. As the process moves forward, there will be many aspects of Taiwan’s accession negotiations to discuss, including various political, legal, and economic issues. In this piece, we set out the government statements and media reports coming from Taiwan; the reactions of other governments; some of the substantive issues that are likely to be raised during the negotiations; and various aspects of the geopolitical context.
Taiwan’s statements on its application
On the same day that Taiwan submitted its official application, Taiwanese president Tsai Ing-wen said on Twitter that “Taiwan's bid to join the CPTPP reflects our commitment to promoting free trade in the Asia-Pacific. I am confident that our membership in this deal would strengthen joint economic development & benefit people across the region & the world.” Tsai also said (link in Chinese) in a public speech on September 24 that Taiwan has done a lot of preparation work over the past couple of years, including amending regulations, communicating with all sectors of society, and consulting with member states. “Now is the best and most appropriate time for us to join the CPTPP,” she added.
Su Tseng-chang, President of the Executive Yuan, said (link in Chinese) that CPTPP is a very important economic integration agreement and that CPTPP member countries are all important trading partners for Taiwan. If Taiwan can join, he said, it will not only expand foreign trade and increase its competitiveness, but also attract foreign investment, increase Taiwan’s employment opportunities, and further Taiwan's economic integration, which will help enhance all Taiwanese industries.
According to the Trade Negotiation Office of the Executive Yuan, the goals of Taiwan’s accession to the CPTPP include:
- Secure trade and investment opportunities
- Diversify trade links
- Integrate with the world and improve economic efficiency
- Secure Taiwan’s place in the global supply chain, especially in the wake of the COVID-19 pandemic
- Fight protectionism by removing trade barriers and promoting common prosperity
When asked about the chances of Taiwan successfully joining the CPTPP during an Economics Committee Meeting of the Legislative Yuan, Hsiao Chen-jung, senior negotiator and executive secretary of the Trade Negotiation Office of the Executive Yuan, said (link in Chinese) that the chance is far more than 20 percent. The positive side for Taiwan's accession is that “all members said they would accept the applications of countries with high standard trade rules,” and “Taiwan meets such conditions”; however, the negative side is that “Taiwan’s international situation is complicated and difficult, and political factors will hinder it from joining the CPTPP,” Hsiao said.
Reactions from other governments
In reaction to Taiwan’s application, Japan offered the most positive feelings. Nikkei reported that Japanese Foreign Minister Toshimitsu Motegi said Japan “welcomes” Taiwan's bid, noting that “Taiwan is an extremely important partner with whom we share basic values like liberty, democracy, human rights and the rule of law, as well as a close economic relationship.” At the same time, he also said that “[w]e will need to carefully assess whether Taiwan can fully meet the high standards” set by the CPTPP.
In reaction to the warm Japanese response, the Taiwanese Ministry of Foreign Affairs has expressed (link in Chinese) gratitude, issuing a statement that: “Both Taiwan and Japan have key positions in the Indo-Pacific strategy. At present, Japan is one of the most influential economies in the world and CPTPP. Its strong support will play a major role in Taiwan’s accession and is of particular significance.” (Full translation available at the end of this piece)
Several governments offered only very general statements on the issue of Taiwan’s application. The Canadian Foreign Ministry told Nikkei that: “Canada will work with other CPTPP members to reach consensus when considering any economy interested in joining”; and that, “[a]spirant economies must be able to meet and comply with the CPTPP's high standards and ambitious market access commitments.” And Lama Khodr, a spokeswoman for the department of Global Affairs, told the Globe and Mail that: “All decisions are made by consensus, and any country that joins CPTPP must meet and comply with the high standard rules and ambitious market access commitments of the CPTPP.”
Along the same lines, Australian Trade Minister Dan Tehan said that “Australia will work with the CPTPP membership to consider Taiwan's application on a consensus basis” with others in the bloc.
Singapore's Ministry of Trade and Industry offered the statement that “Singapore welcomes the interest of any economy that is willing and able to meet the high standards of the CPTPP, and to realise the vision of a free trade area of the Asia Pacific and beyond,” and emphasized that “[t]he CPTPP parties will discuss the matters on accession and decide by consensus.”
According to Nikkei, Malaysia has “remained mum on Taiwan's application.”
Even though neither China nor the United States is part of the CPTPP at this moment, their position on this issue may have an influence on Taiwan’s accession. Not surprisingly, China did not react approvingly to the news of Taiwan’s applications, with a foreign ministry spokesperson saying (link in Chinese), “China firmly opposes all official interactions with Taiwan, firmly rejects Taiwan's accession to any agreement or organization of official nature.” (See the full exchange at the end of this piece). Along the same lines, Zhu Fenglian, spokesperson of the Taiwan Affairs Office of the Chinese State Council, said (link in Chinese) that “Taiwan’s participation in regional economic cooperation must be based on the one-China principle” and “we hope that relevant countries can properly handle Taiwan-related issues and do not provide any convenience and platform for 'Taiwan independence'.”
Judging from the wording of these responses, it seems that for Beijing, Taiwan’s official status under a treaty is more important than Taiwan building stronger economic and trade relations. The precise meaning of the words “official interactions” and “official nature” by Chinese officials is difficult to discern, but previous comments from Chinese officials with regard to Taiwan’s renaming plans for its offices in Washington, DC and Brussels seem to indicate that the names Taiwan uses on the international stage are critical. Taiwan is a WTO member under the name “Chinese Taipei,” and that has been acceptable for China. In this regard, Taiwan’s chief trade negotiator John Deng stressed that “Taiwan is a sovereign, independent nation. It has its own name”; but he also agreed that “for trade deals the name we have used for years is the least controversial.”
The Taiwanese government pushed back on Beijing’s statement. It stated (link in Chinese) that “Taiwan is Taiwan, not part of the People’s Republic of China. The People’s Republic of China has not ruled Taiwan a day and has no right to represent the people of Taiwan internationally ... The Chinese government has no right to speak up.” (Full translation available in the end of this piece)
As for the United States, when a State Department spokesperson was asked about it, he said, “we are not a party to the CPTPP, therefore, we’ll have to defer to CPTPP parties regarding their views on Taiwan’s potential accession.” He added, however, that “we would expect that Taiwan’s record as a responsible member of the World Trade Organization and Taiwan’s strong embrace of democratic values would factor into the CPTPP’s parties’ evaluations of Taiwan as a potential candidate for accession.” (See the full exchange at the end of this piece)
Potential trade issues between CPTPP parties and Taiwan
Taiwan only has a few existing FTAs, which makes it difficult to look to past negotiations to get a sense of how these negotiations might go. However, Taiwan’s WTO trade policy review may give us a sense of what substantive issues might be the focus of Taiwan’s CPTPP accession negotiation.
Looking at the 2018 trade policy review (the next review for Taiwan is likely to be in 2023), CPTPP parties Australia, Canada, Japan, New Zealand, Peru, Singapore, and Viet Nam all made statements at the trade policy review meeting in which they indicated issues of concern to them. We provide here a sampling of these statements.
Australia noted that “despite Chinese Taipei’s intention to pursue liberalization in the agricultural sector, there has been minimal change to the tariff schedule since the last review in 2014.” Australia also suggested further “reducing existing subsidies and support to uncompetitive agricultural enterprises,” and liberalizing the investment and financial markets, such as “relaxing caps for insurance companies investing in overseas infrastructure; allowing insurance companies to lend to green finance; and enabling employee-choice and privately managed pension funds.”
Canada discussed “food standards on imports, certificates of origin, and industrial policy.” In particular, Canada pointed out Taiwan’s “slow processing times for Maximum Residue Levels (MRLs) of pesticides on imports and in some circumstances a zero tolerance level for pesticides on imports” and urged it to take a “science-based approach to MRLs.” Canada also sought more clarity on “certain cornerstone pieces of its industrial policies, including its ‘Five Plus Two’ Innovative Industries Plan, which seeks to increase cross-industry integration to improve input productivity.”
Japan expressed concerns over some food import restrictions related to specific safety issues: “We have strong concerns regarding the import ban on food exports from five Japanese prefectures after the accident at Fukushima Daiichi Nuclear Power Station in 2011. Seven years have already passed since the accident, and many WTO members have either eliminated or eased such regulations. We are aware, however, that Chinese Taipei has strengthened its import ban by introducing the additional labelling standard of ‘prefecture of origin’ for all foods from Japan since 2015. Although we understand the importance of food safety, we strongly request that such measures be reviewed and improved.” Japan was also “strongly concerned by the high tariffs imposed by Chinese Taipei in the agricultural sector.”
Peru noted “high level of public intervention in various sectors and the restrictions placed on investments in several areas of the economy.” It also mentioned “the lowering of significantly high tariffs, particularly those for fisheries and agricultural goods, including non-traditional export products exported by Peru,” and “recommend[ed] the simplification of the different charges associated with the importation of goods, to increase the transparency and predictability of the trade regime.”
Viet Nam “urge[d] Chinese Taipei to speed up the review of pest risk analysis reports of such fresh fruits as rambutan, mango, lychee, longan and pomelo, whose registration application has been submitted so that these products of Viet Nam can soon be exported to Chinese Taipei,” and “to implement the mutually agreed solutions regarding the examination and verification of origin of Vietnamese agricultural products.”
In addition, Singapore, Australia, Japan, New Zealand, Malaysia, and Canada asked questions about specific issues, to which Taiwan responded.
Even though the United States is not a CPTPP member and will not participate in Taiwan’s accession negotiations, some of the trade concerns of the United States may be shared by Taiwan’s other trading partners. Thus, the catalog of complaints documented in USTR’s 2021 National Trade Estimate Report on Foreign Trade Barriers is another good source of potential issues that CPTPP members might raise. Here are a number of issues identified in the report:
- “[M]any TRQs remain in place, especially in the area of agriculture. TRQs still cover 16 agricultural products, including rice, peanuts, bananas, and pineapples.”
- “As of March 2021, Taiwan has recourse to [special safeguards] for 17 agricultural product categories, including poultry meat, certain types of offal, and milk.”
- “U.S. stakeholders continue to request that Taiwan lowers or eliminates tariffs on many goods, including large motorcycles, agricultural products, and soda ash.”
- “In certain years, the Taiwan authorities have rejected bids from U.S. rice exporters under its country-specific quota (CSQ) regime... U.S. exporters have raised concerns that Taiwan’s ceiling price mechanism, which is not made public, arbitrarily sets prices lower than the levels bid by U.S. exporters, causing the tenders to fail.”
- “The United States and other trading partners continue to express their concerns to the Taiwan authorities that steps should be taken to ensure that imported alcoholic beverages are not taxed at a higher rate than domestically produced alcoholic beverages, including mijiu.”
- “In May 2019, Taiwan’s Ministry of Finance completed the process of establishing two additional Harmonized System (HS) codes for genetically engineered (GE) food and feed. Since GE foods are evaluated in comparison to their conventional counterparts, there is no scientific basis for Taiwan’s separate HS codes for GE food and feed. To date, this situation has not caused any trade stoppages, but it could pose complications in the future.”
- “On January 1, 2021, Taiwan implemented country of origin labeling (COOL) requirements for a range of pork products (including processed products). ... The United States has raised concerns about these COOL requirements bilaterally with Taiwan, including on the margins of the October 2020 WTO Committee on Technical Barriers to Trade meeting.”
- “The United States is concerned that the MRLs for imported pork kidney and other edible parts do not reflect consumption exposure. The United States is also concerned that Taiwan’s method of testing for ractopamine residue is not aligned with methods of analysis for ractopamine recommended by Codex and could provide inaccurate results. The United States continues to ask that Taiwan align its methods of detection with the standards utilized by countries, in this case Codex.” “Apart from ractopamine, Taiwan has also not established MRLs for other beta-agonist compounds or provided science-based rationale to support its policy. The United States continues to urge Taiwan to implement science-based MRLs without undue delay and to accept and approve new applications for MRLs for beta-agonists based on science and in a timely manner.”
- “Taiwan’s slow process for establishing MRLs for pesticides, low number of approved MRLs, and zero tolerance policy for pesticides without established MRLs have resulted in U.S. shipments being stopped at ports of entry and have dissuaded some trade due to the high risk of rejection.”
- “In 2019 and 2020, Taiwan increasingly rejected shipments of chipping potatoes due to an overly restrictive approach to rot, mold, and sprouting.”
- “[M]ore comprehensive copyright legislation remains stalled, and considerable challenges remain in combatting copyright and related infringement, particularly with respect to online piracy.”
- “One of the concerns relates to the burdensome application process that a financial institution must undergo in order to obtain FSC permission to use cloud computing services. The application requires submitting up to 17 documents and a lengthy review process, which may discourage financial institutions from using cloud computing services.”
- “Taiwan prohibits or limits foreign investment in certain sectors, including agricultural production, chemical manufacturing, bus transportation, sewage and water services, and social services such as public education, health, and childcare. Foreign ownership in telecommunications, power transmission and distribution, piped distribution of natural gas, and high-speed rail is limited to 49 percent direct ownership of the total shares issued. The foreign ownership ceiling on airline companies, airport ground handling companies, forwarders, air cargo terminals, and catering companies is 49.99 percent, with each individual foreign investor subject to an ownership limit of 25 percent.”
- “Regulatory and legislative scrutiny of select investments on grounds unrelated to national security contributes to ongoing concerns about the predictability of Taiwan’s investment approval procedures.”
Taiwan has already tried to address some of the likely trade concerns of the CPTPP parties in its effort to smooth the accession process. The Executive Yuan announced the following changes to meet the CPTPP's requirements:
- making regulations more transparent;
- enhancing protection of the intellectual property rights of new pesticides;
- redefining the scope of the postal monopoly;
- amending the Plant Variety and Plant Seed Act to expand the scope of protection to be in line with the UPOV;
- simplifying the regulations on the labeling of cosmetic hygiene and safety; and
- enhancing IPR protection for medicines by providing data exclusivity and patent linkage, etc.
In terms of regulatory changes, Taiwan’s government, in a June 2020 document entitled “Progress in the review of the CPTPP regulatory adjustment projects”, identifies four laws that are pending deliberation before the Legislative Yuan (including the Patent Act, Copyright Act, Trademark Act and Draft Digital Communications Act), as well as eight laws for which the amendments have already passed in the legislature (including the Pharmaceutical Affairs Act, The Fisheries Act, Management Act of Cosmetic Hygiene). These regulatory changes aim at bringing Taiwan’s practices more in line with the requirements of the CPTPP.
As crucial as the substantive legal and policy issues are to a successful negotiation, Taiwan’s application will be overshadowed to some extent by geopolitical issues. Taiwan’s chief trade negotiator John Deng acknowledged that “if China joins [the CPTPP] first, Taiwan’s membership case should be quite risky. This is quite obvious.” At the same time, he denied any direct connection between Taiwan’s application and Beijing’s, which was submitted one week earlier. As Jeff Wilson of the Perth USAsia Centre put it, the dueling Taiwan/China applications represent “a geoeconomic showdown whose outcome carries high stakes for the Indo-Pacific and the world” and “we're about to see the CPTPP membership become a proxy battleground for the broader geostrategic rivalries shaping the Indo-Pacific.”
During the WTO accession negotiations for China and Taiwan, an accommodation was reached in which the final stage of the WTO accessions of China and Taiwan were linked in time, with China becoming a Member on December 11, 2001 and Taiwan doing so on January 1, 2002. Former WTO Secretariat official Peter Ungphakorn noted that something similar could occur here: “Perhaps there'll be a special arrangement: China's and Taiwan's agreements done simultaneously so neither can veto the other joining, as with their WTO accessions.”
As with the Chinese application, Taiwan's accession process is at its very early stages, and it is hard to say with any great certainty how things will go. And while we can identify possible areas of interest in the substantive negotiations, how the negotiations will proceed in these areas is difficult to ascertain at this point. It is worth watching a number of related issues: The UK’s CPTPP application process; the ongoing U.S. review of its China trade policy; and political and economic tensions between China and various CPTPP parties.
Kyodo News: Yesterday, the Taiwan authorities submitted application to join the CPTPP. Considering that China's mainland and the Taiwan region both acceded to the WTO, what is China's comment on the position of the Taiwan authorities?
Zhao Lijian: There is only one China in the world, and Taiwan is an inalienable part of China's territory. The one-China principle is a universally recognized norm governing international relations and the consensus of the international community. China firmly opposes all official interactions with Taiwan, firmly rejects Taiwan's accession to any agreement or organization of official nature. China's position on this issue is clear.
Bloomberg: Chinese Taipei is a member of the WTO. Could a similar arrangement be made for the CPTPP?
Zhao Lijian: I just gave an clear answer on China's position on this issue.
QUESTION: Thanks, Ned. I wanted to see if you had anything to say about Taiwan’s application to join the successor to the TPP. I realize the U.S. isn’t involved in that, but does the U.S. have any take on that? And how do you see as well the Chinese reaction to that, including the jets that recently have been flying near Taiwan? Thanks.
MR PRICE: Thanks for that, Shaun. We do understand that Taiwan has submitted a formal request to join the CPTPP. As you alluded to, we are not a party to the CPTPP, therefore, we’ll have to defer to CPTPP parties regarding their views on Taiwan’s potential accession. That said, we would expect that Taiwan’s record as a responsible member of the World Trade Organization and Taiwan’s strong embrace of democratic values would factor into the CPTPP’s parties’ evaluations of Taiwan as a potential candidate for accession. Our colleagues at the USTR Office may have more to say on that as well.
When it comes to Taiwan more broadly, we will continue to support a peaceful resolution of cross-trade issues consistent with the wishes and the best interest of people in Taiwan – people on Taiwan, excuse me. We urge Beijing to cease its military, diplomatic, and economic pressure against Taiwan and instead engage in meaningful dialogue with Taiwan.
Both Taiwan and Japan have key positions in the Indo-Pacific strategy. At present, Japan is one of the most influential economies in the world and CPTPP. Its strong support will play a major role in Taiwan’s accession and is of particular significance. We deeply hope that through the joint efforts of Taiwan and Japan, we will continue to deepen the mutually beneficial relations with countries with similar ideas via regional economic integration, and work together to promote peace, stability and prosperity in the Indo-Pacific region.
In response to the Chinese government’s public opposition to our application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on September 23, the Ministry of Foreign Affairs reiterated that Taiwan is Taiwan, not part of the People’s Republic of China. The People’s Republic of China has not ruled Taiwan a day and has no right to represent the people of Taiwan internationally. Only Taiwan’s democratically elected government can represent Taiwan’s 23.5 million people in international organizations and regional economic and trade mechanisms. We applied to join the CPTPP on behalf of the people of Taiwan. The Chinese government has no right to speak up. Moreover, not only that China is not a member of the CPTPP, but its trading system has also been widely questioned by the international community that it does not meet the high standards of the CPTPP.
The Chinese government only wants to bully Taiwan in the international community, which is the main culprit of the increase in cross-strait hostility. The Chinese government should deeply introspect and refrain from being an enemy of the people of Taiwan. The leaders of the Chinese Communist Party just declared at the United Nations that "we did not, and will not invade, bully, or claim hegemony in the future." Within a few hours, the Chinese government publicly suppressed Taiwan when it applied for the CPTPP and threatened the people of Taiwan with massive air force. Only the Chinese government would say one thing while doing another thing. The Ministry of Foreign Affairs strongly condemns China's words and deeds of bullying Taiwan.